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Provident fund of high salaries will also be taxed

The Trend government has made a major announcement in the budget. This is going to affect the employees with a high salary. According to ...

The Trend government has made a major announcement in the budget. This is going to affect the employees with a high salary. According to the proposal of Finance Minister Nirmala Sitharaman, three investment schemes EPF, National Pension Scheme (NPS) and Retirement Fund can now be taxed, as the maximum investment limit of Rs 7.5 lakh has been fixed.

Highlights

Provident fund of people with a high salary package can come under the tax net

There was a maximum investment limit of Rs 7.5 lakh.

This proposal made by the Finance Minister in the budget will come into effect from 1 April 2021

This proposal will not affect people with low salary package

New Delhi

Union Finance Minister Nirmala Sitharaman has proposed an alternative tax regime with low tax rates on the one hand in the Budget 2020, and on the other hand has also fixed the maximum limit for investment in some tax saving schemes. According to the budget proposal, the three investment schemes that offer tax benefits EPF, National Pension Scheme ( NPS ) and retirement funds can now come under the tax net, as a maximum investment limit of Rs 7.5 lakh has been set. However, this will only affect the employees with high salary package.

April 1, 2021 , the maximum limit for total investment in NPS , Retirement Fund and Provident Fund in a year will be Rs 7.5 lakh and taxable if invested above it. It has also been proposed in the budget that the interest and dividend amount earned last year will also be taxable.

Read: If you choose the new option of income tax, then there can be a big loss. We understand the

mathematics of tax by

an example. Suppose the basic salary of a person is Rs 30 lakh, then the total contribution made by the employer will be ...

Employer's contribution to PF - Rs 3.60 lakh NPS -

Rs 3 lakh

retirement fund - Rs 1.50 lakh

Total investment - Rs 8.10 lakh

Taxable amount - Rs 60,000

There was no upper limit

till now, the contribution by the employer to PF and NPS was taxfree and there was no upper limit also. Employers have to contribute 12% of basic salary in EPF and 10% in NPS to employees. Tax exemption can also be availed in this.

Read: If you are bothered by two income tax options, then this calculator will

have an impact on those with high salary packages, those

who have less salary, this proposal will not have any effect. Whereas, the salary package of people with high salary income is designed in such a way that a major part of their salary can be put in these three funds, so that this part of salary does not come under the tax net.

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